For the corporate bond issues reported in the previous question, answer the following questions:

a. Should a triple \(A\) rated bond issue offer a higher or lower yield than a double \(A\) rated bond issue of the same maturity?

b. What is the spread between the General Electric Capital Company issue and the Mobil Corporation issue?

c. Is the spread reported in (b) consistent with your answer to (a)?

d. The yield spread between these two bond issues reflects more than just credit risk. What other factors would the spread reflect?

e. The Mobil Corporation issue is not callable.

However, the General Electric Capital Company issue is callable. How does this information help you in understanding the spread between these two issues?

Data from Previous Question

In the May 29, 1992, Weekly Market Update, published by Goldman Sachs \& Co., the following information was reported in various exhibits for certain corporate bonds as of the close of business Thursday, May 28, 1992:

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Issuer Treasury Rating Yield Spread Benchmark General Electric Triple A 7.87% 50 10 Capital Co. Mobil Corp. Double A 7.77 40 10 Southern Bell Triple A 8.60 72 30 Tel & Teleg Bell Tel Co Pa Double A 8.66 78 30 AMR Corp Triple B 9.43 155 30